Asaleo Care Limited

AHY Details

Approval for Scheme Implementation Agreement: Asaleo Care Limited (ASX: AHY) manufactures, markets, distributes, and sells essential everyday consumer products across the feminine, incontinence and baby care, consumer tissue, and professional hygiene products categories in Australia and New Zealand.  Foreign Investment Review Board (FIRB) and New Zealand Overseas Investment Office (OIO) have recently approved the scheme under which Essity Holding Company Australia Pty Ltd, a wholly owned subsidiary of Essity Group Holding BV, will acquire 100% ordinary shares in Asaleo Care. 

Under the scheme, AHY shareholders will receive $1.40 for each share, funded by Essity. In addition, special dividends will be received by the shareholders ($0.02) on a record date of 15 June 2021 and an ordinary dividend of $0.03 has been paid recently on 31 March 2021. The scheme is subject to a number of conditions such as approvals from the regulatory authority, approval from the court and lastly approval from the shareholders. For the purpose, AHY is expecting a second court date in early mid-June 2021. The record date for scheme and implementation will be in late June 2021.

Important Dates (Source: Company Reports)

FY20 Financial Highlights: AHY has registered an increase in total revenue to $420.02mn in FY20 against $410.31mn in FY19. The company has seen an increased profit to $32.29mn in FY20 against $22.08mn in FY19. Moreover, the cash balance improved to $55.12mn as on 31 December 2020 against $33.16mn as on 31 December 2019.

Key Risks: The company requires regular supply for its products to the retailers and distributors. Any disruption in the supply chain may impact the business of the company. The company deals in multiple currencies. Thus, any fluctuation in the foreign currency may impact the financials of the company.

Outlook: AHY is targeting revenue growth in a range of 5%-7% for FY21 on the back of trading momentum in feminine care, retail incontinence, and B2B incontinence healthcare segment. The company is targeting its EBITDA to be in a range of $90mn-$93mn for FY21. AHY expects a mid single-digit growth in its revenue ($462.2mn-$471.0mn) and a growth of ~10% ($99.0mn-$102.3mn) in its EBITDA in FY22. 

Valuation Methodology: EV/Sales based Relative Valuation Method (Illustrative)

Source: Analysis by Kalkine Group 

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: The stock of AHY gave a return of ~0.71% in the last one month and a return of ~-0.704% in the last three months. The current market capitalisation of AHY stands at ~$763.08mn as of 27 May 2021. The stock is currently trading above the average 52-weeks’ price level range of ~$0.920~$1.450. On the technical analysis front, the stock has a support level of ~$1.349 and a resistance of ~$1.451. We have valued the stock using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with a correction of mid single-digit (in % terms). We believe that the company can trade at a slight premium as compared to its peer average, considering a consistent increase in revenues from FY18 to FY20 and an increase in liquidity position with a higher cash balance as on 31 December 2020. For this purpose, we have taken peers McPherson's Ltd (ASX: MCP), Blackmores Ltd (ASX: BKL), BWX Ltd (ASX: BWX). Considering an ongoing scheme implementation agreement to sell its complete holding, associated business risks, current trading levels and valuation, we suggest investors to book profit and give a “Sell” rating on the stock at the current market price of $1.410, up by ~0.355% as on 27 May 2021.

AHY Daily Technical Chart, Data Source: REFINITIV 

PWR Holdings Limited

PWH Details

Sale of Indirect Shareholding by the Director: PWR Holdings Limited (ASX: PWH) is involved in the designing, engineering, production, testing, validation and sales of customised aluminum cooling products and solutions to the motorsports and automotive original equipment manufacturer (OEM) in Australia. The company is present in domestic and international markets. The company has announced on 3 May 2021, regarding the sale of shares held by the director of the company, Kees Weel. The director, Mr. Weel has disposed 689,531 shares, held through his associated entity KPW Property Holdings Pty Ltd at a price of $6.11 per share between 23 April-30 April 2021.  Recently, one of the company’s substantial shareholding, Perpetual Limited and its related bodies increased its holding in the company from 5.35% to 6.43%.

1HFY21 Financial Highlights: PWH has registered an increase in revenue to $37.22mn in 1HFY21 against $29.77mn in 1HFY20. The company has registered an increase in profit to $6.57mn in 1HFY21 against $3.45mn in 1HFY20. PWH has seen a decline in its cash balance to $16.78mn as on 31 December 2020 against $20.80mn as on 30 June 2020.

Key Metrics (Source: Analysis by Kalkine Group)

Key Risks: The company deals in multiple currencies. Thus, any adverse movement in foreign exchange prices may impact the financials of the company. The company holds an interest-bearing liability and may see an impact on its profit margins with a severe movement in Interest rates.

Outlook: PWH has plans to operate its online store in 2HFY21. The company is likely to develop its online store platforms to be launched in the US and Europe in FY22. PWH has completed capital expenditure program in 1HFY21 and expecting business growth through improved productivity, going forward.

Valuation Methodology: EV/Sales based Relative Valuation Method (Illustrative)

Stock Recommendation: The stock of PWH gave a return of ~0.64% in the last one month and a return of ~13.55% in the last three months. The current market capitalisation of PWH stands at ~$621.11mn as of 27 May 2021. The stock is currently trading above the average 52-weeks’ price level range of ~$3.80~$6.57. On the technical analysis front, the stock has a support level of ~$5.60 and a resistance of ~$6.57. We have valued the stock using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with a correction of low single-digit (in % terms). We believe that the company can trade at a slight premium as compared to its peer median, considering an increase in revenue and profits in 1HFY21 and developing online store platform to be launched in Europe and the US in FY22. For this purpose, we have taken peers Carbon Revolution Ltd (ASX: CBR), ARB Corp Ltd (ASX: ARB), Bikeexchange Ltd (ASX: BEX). Considering the associated business risks, current trading levels and valuation, we suggest investors to book profit and recommend a “Sell” rating on the stock at the current market price of $6.20 as on 27 May 2021.

PWH Daily Technical Chart, Data Source: REFINITIV

Ardent Leisure Group Limited 

ALG Details

Plans Underway for Hotel and Tourist Park: Ardent Leisure Group Limited (ASX: ALG) operates in leisure businesses in Australia and the US. The company operates through two segments: Main Event and Theme Parks. ALG has recently announced on 5 May 2021 regarding a plan to develop a $75mn Dreamworld resort including a hotel and a tourist park. For the purpose, the company has entered into an agreement with Evolution Group to fund and build the accommodation adjacent to the Dreamworld park. The company expects it to be a positive move as it will contribute to growth in revenues by generating tourism on the Gold Coast. 

Main Event Entertainment Performance Update: ALG has provided an update on 21 April 2021 for its performance for the main event. ALG has witnessed a revenue CAGR of 23% during FY19 to FY21 and up by 40% in the month of April 2021. Moreover, the first week of May 2021, has registered a constant centre revenue increase of 8%, indicating strong walk-in revenue. 

1HFY21 Financial Highlights: ALG has registered a decline in its revenue to $137.56mn in 1HFY21 against $263.0mn in 1HFY20. The company has incurred a loss of $83.6mn in 1HFY21. The company has registered a decline in its cash balance to $105.41mn as on 29 December 2020 against $161.61mn as on 30 June 2020.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks: The company has witnessed a decline in its revenue due to COVID-19 impacts. Moreover, the company holds an interest-bearing liability and may see an impact on its profit margins with a severe movement in Interest rates.

Outlook: The company has witnessed a positive momentum in its constant centre revenue in the first week of May 2021. ALG expects the positive momentum to offset with a soft performance from school event business during FY21. The company is positive on the development of Dreamworld resort and expects a positive revenue momentum post COVID-19 situation.

Valuation Methodology: EV/Sales based Relative Valuation Method (Illustrative)

Source: Analysis by Kalkine Group 

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: The stock of ALG gave a return of ~18.93% in the last one month and a return of ~57.03% in the last three months. The current market capitalisation of ALG stands at ~$491.69mn as of 27 May 2021. The stock is currently trading above the average 52-weeks’ price level range of ~$0.30~$1.095. On the technical analysis front, the stock has a support level of ~$0.853 and resistance of ~$1.094. We have valued the stock using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with a correction of low single-digit (in % terms). We believe that the company can trade at a slight discount as compared to its peer average, considering the company has incurred a loss in 1HFY21 and soft performance from the school event business in May 2021. For this purpose, we have taken peers Viva Leisure Ltd (ASX: VVA), Sealink Travel Group Ltd (ASX: SLK), Crown Resorts Ltd (ASX: CWN) to name a few. Considering a decline in revenue in 1HFY21, loss incurred in H1FY21, soft performance from the school event business, current trading levels and valuation, we suggest investors to book profits and give a “Sell” rating on the stock at the current market price of $1.005, down by ~1.952% as on 27 May 2021.

ALG Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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